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Restricted anonymity for bearer shares

Bearer shares in joint stock companies will either have to be registered with a central depository or physically deposited with banks, under proposals announced by the Ministry of Justice.

Both alternatives will require the owner of the share to be identified to the central depository or bank, and the information will then be available to specified public bodies (such as the police and those awarding public contracts or providing subsidies).

They also require any transfer of ownership to be subject to a change of registration with the central depository or the bank, to ensure the register remains up to date.

The legislative changes, which are planned to appear in the Act on Corporations, are aimed at combating a lack of transparency in the ownership structure of joint stock companies with bearer shares. The Act is unlikely to become law before 2013 and will probably then provide a further 18-month period from the date of its coming into force for joint stock companies to convert bearer shares into registered shares or ‘immobilized’ in bank depositories.

Bearer shares are permitted under Czech law but their holders (especially of materialised bearer shares) may not only be unknown to the company but also be unidentifiable for state authorities (for criminal, tax or other purposes).

Ownership of materialised bearer shares is currently transferred with possession, in the same way as handing over a banknote. This is not true for registered shares, whose holders are easily identifiable from the share certificate or the company’s register of shareholders.

The Ministry’s approach is not to abolish bearer shares, as anyone wishing to remain anonymous could still register a ‘dummy shareholder’ as the registered owner, but to restrict the anonymity the holders enjoy in order to combat money launderers and those seeking to circumventing the Conflict of Interests Act, especially in relation to public contracts.

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